No word on when town, employees will take healthcare premium holiday

Jan 26, 2012

A healthcare "premium holiday," which will save the town money because it will not pay healthcare costs for a period of time, is forthcoming, though officials aren't sure exactly when.

Finance Committee members asked Town Administrator Mark Andrews for an update during the committee's Wednesday, January 25 meeting. FinCom members said they'd last heard that the break -- the savings from which was used to fill a funding gap in this year's budget -- would occur during the holiday season.

The six-week long premium holiday is projected to save the town more than $1 million. Town employees will also enjoy some savings, as they, too, will stop paying premiums for that period of time.

Under a self-insurance plan, the town and employees pay premiums into a trust fund. The town contributes 75% of the premiums while employees pay 25%.

All health claims are paid out of the trust fund, with insurance companies involved only in claims processing. Unlike a traditional insurance plan, the town saves money if claims cost less than expected.

Faced with a dire budget situation and more money in the trust fund than officials said was necessary, Town Meeting voters in May approved Andrews' budget, which used the projected savings from the holiday for operating expenses.

Andrews told the FinCom on Wednesday that the town has every intention to take the holiday, but is waiting to ensure that, when doing so, the fund doesn't run too low in cash.

The town will run a deficit if it does not take the holiday, since the money from the projected savings was plugged into this year's budget.

There is some delay between the time employees get care from healthcare providers and when the money is actually paid from the fund, which makes the timing of the holiday tricky, Andrews said.

"On any given month, you need to take a three-to-four month look back," he told the FinCom, adding that the town is making sure "that our run rates are on-target and then we'll administer the holiday."

Some FinCom members, Selectmen, and Town Meeting voters alike expressed concern about the one-time infusion of money into the budget by way of a premium holiday. Opponents argued that the holiday would simply kick the can -- a budget shortfall -- down the road until this year.

Budget season has just begun, but town and school department officials have already noted that the budget, though level-funded in state aid, has numerous challenges.